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Analysts see Hungary's credit-rating outlook changing to stable by year-end

Analysts interviewed by the business daily Napi Gazdaság said Hungary's negative credit-outlook could change to stable or possibly positive this year, in line with Moody's views, but an upgrade is unlikely this year, the newspaper reported on Monday.

Moody's said it would change Hungary's credit-rating outlook from negative to stable if the government budget remains disciplined in the coming months after it became clear that the 2009 cash-flow deficit was smaller than the target and chances are good that the 3.9% ESA deficit target will be fulfilled as well.

It could have easily resulted in a downgrade if Hungary had not generated such a substantial December surplus, analyst György Barcza of K&H Bank said. Hungary has a Moody's credit rating three grades above the speculative category, while S&P has placed the country only one grade above the speculative category. If Hungary's economic situation does not deteriorate any further this year, the negative outlook is likely to change to stable, Barcza said. This, however, will require more than measures projecting a reduction in the debt curve - the economy must actually be set onto a falling-debt curve. This will first become possible during the implementation of the 2011 budget. General experience also shows that it takes one or two years before a downgrade can be followed by a reclassification.

A stable outlook is rather likely at the end of the year, but there is still a lot of uncertainty with regard to the second half of the year, analyst Zsolt Kondrát of MKB Bank said. The spring general elections constitute the key uncertainty factor, but if the global climate is unfavorable, the intentions to curb the debt could prove insufficient. An increase in the deficit resulting from taking over the debt of state-owned companies would have no significant economic impact, so credit-rating firms would probably not “mind” if some of this would be accounted this year, Kondrát said. However, if this is not matched by restructuring the companies - transport companies in particular - there is no guarantee that this will not be repeated in the future, which would not be ignored by the credit rating agencies. (MTI-Econews)